Commission to look at bank computer systems

Banks should be forced to create a common computer system to make it easier
for new entrants to challenge the country’s established high street banks,
according to a member of the commission looking at the structure of the
industry.

Andy Haldane, the Bank of England director responsible for financial stability, is among those who support the creation of a unifiied IT system for banks

Banks should be forced to create a common computer system to make it easier for new entrants to challenge the country’s established high street banks, according to a member of the commission looking at the structure of the industry.

Mark Garnier, a Conservative MP and a member of the banking commission, said improvements to IT systems, as well as account switching, would help improve competition. “You cannot have 40-year-old systems. I’d like to see full account portability and a uniform IT system that makes it easier for challengers to enter the industry,” said Mr Garnier, speaking to Reuters. Expensive computer systems and the difficulty of switching from one bank to another are seen as two of the biggest barriers to challenger banks which could compete with Britain’s biggest high street lenders.

Andy Haldane, the Bank of England director responsible for financial stability, told the commission that he thought IT should become a “central utility-type function” that would enable any new entrant to “plug and play”.

The problem of relying on ageing computers was highlighted over the summer when a software “glitch” at Royal Bank of Scotland saw millions of the lender’s customers lose access to their money for several days and, in some cases, nearly a month.

Since then, RBS has pledged to spend hundreds of millions of pounds on ensuring there is no repeat of the problems, however there are concerns that other banks are also dependent on similarly fragile systems.

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The banking commission was set up in response to the Libor-rigging scandal, however, its remit was broadened when George Osborne handed it responsibility for the pre-legislative scrutiny of the forthcoming Financial Services Bill. Speaking to the commission this week, the Chancellor he wanted there to be more big banks.